StemCells, Inc., Award Agreement with California Stem Cell Agencyy

5/21/2018 StemCells, Inc., Award Agreement with California Stem Cell Agencyy

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EX-10.35 3 d519193dex1035.htm EX-10.35Exhibit 10.35

CALIFORNIA INSTITUTE FOR REGENERATIVE MEDICINELOAN AGREEMENT

This LOAN AGREEMENT (the Agreement) is entered into as of April 9, 2013 (the Effective Date), by and

between the California Institute for Regenerative Medicine (CIRM) and StemCells, Inc. (Loan Recipient).

RECITALS

A. Whereas, California voters approved Proposition 71, the California Stem Cell Research and Cures Act, in

November 2004 to support stem cell research for the development of life-saving regenerative medical treatments andcures;

B. Whereas, one of the purposes of Proposition 71 is to advance the biotech industry in California to world

leadership, as an economic engine for Californias future;

C. Whereas, CIRM was established pursuant to Proposition 71 to make grants and provide loans for stem cellresearch, research facilities, and other vital research opportunities;

D. Whereas, CIRM issued Request for Applications 10-05 (CIRM Disease Team Therapy Development Awards) in2010, and a Supplement to the RFA in 2011, to solicit applications for research projects designed to advance preclinicaland/or early clinical development of novel therapies, derived from or targeting stem cells or utilizing direct

reprogramming, potentially offering unique benefit with well-considered risk, to persons with disease or serious injury;

E. Whereas, CIRM, as part of Request for Applications 10-05, offered Company-Backed Loans and Product-BackedLoans to for-profit entities, and to non-profit entities whose applications included a co-principal investigator from a for-

profit entity that was willing to undertake the required loan obligations;

F. Whereas, Loan Recipient is a for-profit company that is seeking funds to support Loan Recipients researchregarding the use of neural stem cell transplantation to treat Alzheimers disease;

G. Whereas, Loan Recipient applied for a Disease Team Therapy Development Award, and on September 5, 2012,

CIRMs Governing Board, the Independent Citizens Oversight Committee, approved the award of a Product-Backed

Loan to Loan Recipient in furtherance of the purposes of CIRM;

H. Whereas, this Agreement sets forth the terms and conditions pursuant to which CIRM will loan funds to Loan

Recipient, and Loan Recipient will repay the amounts owing, plus interest, and a multiple payback risk premium, toCIRM; and

I. Whereas CIRMs President has granted Loan Recipients request to extend the project start date to no later than

January 1, 2014;

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NOW, THEREFORE, in reliance on the mutual representations, warranties and agreements herein contained, theparties agree as follows:

ARTICLE IDEFINITIONS

1.1 Certain Definitions. As used in this Agreement, the following terms have the meanings indicated below.

Affiliate. The term Affiliate shall mean any Person directly or indirectly controlling or controlled by, or underdirect or indirect common control with, another Person. A Person shall be deemed to control another Person solely forpurposes of this definition if such Person possesses, directly or indirectly, the power to direct, or cause the direction of, themanagement and policies of the other Person, whether through the ownership of voting securities, common directors,

trustees or officers, by contract or otherwise; provided that, in any event for purposes of this definition, any Person thatowns, directly or indirectly, ten percent (10%) or more of the securities having the ordinary voting power for the electionof directors or governing body of a corporation or ten percent (10%) or more of the partnership or other ownership interest

of any other Person (other than as a limited partner of such other Person) will be deemed to control such corporation orother Person).

Application.The term Application shall mean the research award application, identified as DR2A-05416, that

Loan Recipient submitted to CIRM in response to RFA 10-05, and any attachment or appendices thereto.

Authorized Representative.The term Authorized Representative shall mean those persons shown on the list ofofficers provided by Loan Recipient pursuant to Section 4.12(e) hereof or on any update of any such list provided by Loan

Recipient to CIRM, or any further or different officers of Loan Recipient so named by an Authorized Representative ofLoan Recipient in a written notice to CIRM.

Budget.The term Budget means the budget of Loan Recipient for the CIRM-Funded Project, defined below, on a

stand-alone basis, which shall be in such detail as is required by CIRM.

Business. The term Business shall mean the CIRM-Funded Project and the development and commercialization ofProducts resulting from the CIRM-Funded Project.

Capital Lease.The term Capital Lease shall mean any lease of Property which, in accordance with GAAP, isrequired to be capitalized on the balance sheet of the lessee.

Capitalized Lease Obligation.The term Capitalized Lease Obligation shall mean, for any Person, the amount ofthe liability shown on the balance sheet of such Person in respect of a Capital Lease determined in accordance withGAAP.





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Change of Control. The term Change of Control shall mean a sale, merger, transfer, exchange or other disposition(whether of assets, stock or otherwise) of a majority or controlling ownership position of Loan Recipient.

CIRM.The term CIRM shall mean the California Institute for Regenerative Medicine, including any successoragency or department of the State of California.

CIRM-Funded Project.The term CIRM-Funded Project shall mean the work described in the Application and in

the Notice of Loan Award (defined below), specifically the proposal to evaluate, through pre-clinical studies funded inpart by CIRM, a novel cell therapy involving the use of HuCNS-SC cells (purified human neural stem cells) to treatAlzheimers disease. An agreed-upon aim of the CIRM-Funded Project is the filing of an Investigative New Drugapplication with the U.S. Food and Drug Administration for the clinical study of HuCNS-SC cells in Alzheimers disease

(the IND). The Loan Recipient must obtain prior approval from CIRM for any change in the nature or scope of theCIRM-Funded Project pursuant to CIRMs Grants Administration Policy, article V, section D(1). Upon such approval, theterm CIRM-Funded Project shall include any such deviation, amendment or change that is so approved by CIRM.

CIRMs Governing Board.The term CIRMs Governing Board shall mean the Independent Citizens OversightCommittee.

CIRM Representatives. The term CIRM Representatives shall mean CIRMs officers, employees, agents,

attorneys, consultants, accountants and members of CIRMs Governing Board.

Code. The term Code shall mean the Internal Revenue Code of 1986, as amended, and any successor statutethereto.

Controlled Group.The term Controlled Group shall mean all members of a controlled group of corporations andall trades or businesses (whether or not incorporated) under common control which, together with Loan Recipient, aretreated as a single employer under Section 414 of the Code.

Direct Research Funding Costs.The term Direct Research Funding Costs shall mean the sum of Project Costsand Facilities Costs.

Disbursement.The term Disbursement shall have the meaning given to it in Section 4.4(a) of this Agreement.

Disbursed Loan Amount. The term Disbursed Loan Amount shall mean that amount of the Loan Award thatCIRM has distributed in immediately available funds to the Loan Recipient through any one or more Disbursements.

ERISA.The term ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended, or anysuccessor statute thereto.





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Facilities Costs.The term Facilities Costs shall mean the general operating costs of the facilities that will houseany element of the CIRM-Funded Project.

Financial Milestones.The term Financial Milestone(s) shall have the meaning given in Exhibit A of thisAgreement.

Indebtedness.The term Indebtedness shall mean for any Person (without duplication), (a) all indebtedness created,

assumed or incurred in any manner by such Person representing money borrowed (including by the issuance of debtsecurities), (b) all indebtedness for the deferred purchase price of property or services (other than trade accounts payablearising in the ordinary course of business), (c) all indebtedness secured by any Lien upon Property of such Person, whetheror not such Person has assumed or become liable for the payment of such indebtedness, (d) all Capitalized Lease

Obligations of such Person, and (e) all obligations of such Person on or with respect to letters of credit, bankersacceptances and other extensions of credit whether or not representing obligations for borrowed money.

Indirect Costs.The term Indirect Costs shall mean the administrative costs (including but not limited to loan

origination and administration fees) incurred for common or joint objectives which cannot be readily and specificallyidentified with a particular project. Indirect costs shall be capped at twenty percent (20%) of Direct Research FundingCosts, exclusive of the costs of equipment, tuition and fees, and subcontracts, as group, totaling more than $25,000 per

year.

Intellectual Property and Industry Subcommittee.The term Intellectual Property and Industry Subcommittee

shall mean the Intellectual Property and Industry Subcommittee of the CIRMs Governing Board, as such subcommitteemay be constituted from time to time to oversee the performance of Borrowers, or any successor committee thereto.

LIBOR. The term LIBOR shall have the meaning given in Section 4.3 of this Agreement.

Lien.The term Lien shall mean any mortgage, lien, security interest, pledge, charge or encumbrance of any kind in

respect of any Property, including the interests of a vendor or lessor under any conditional sale, Capital Lease or other titleretention arrangement.

Loan. The term Loan shall mean the Product-Backed Loan specified in Section 4.1 of this Agreement.

Loan Administration Policy.The term Loan Administration Policy shall mean the CIRM Loan AdministrationPolicy, as approved by the Office of Administrative Law, effective August 29, 2012, incorporated by reference intoSection 100800 of Title 17 of the California Code of Regulations, and as attached hereto as Exhibit B, including

amendments thereto adopted by CIRM after the Effective Date if agreed to by CIRM and Loan Recipient.Loan Award. The term Loan Award shall mean the award of nineteen million, three hundred and nine thousand,

and four hundred and three dollars ($19,309,403) to Loan Recipient, which was approved by CIRMs Governing Board on

September 5, 2012.





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Loan Balance.The term Loan Balance shall mean the principal amount CIRM distributes to Loan Recipientpursuant to any Disbursement plus accrued interest thereon, less any prepayment(s) made under Section 4.7(a).

Loan Documents.The term Loan Documents shall mean this Agreement, the Notice of Loan Award, and alldocuments incorporated by reference pursuant to Articles II and III.

Loan Period.The term Loan Period shall mean the ten-year period beginning on the Project Start Date, unless the

Loan Recipient requests to extend the term of the Loan Period pursuant to Section 4.8 and Section F of Article VII of theLoan Administration Policy and the Intellectual Property and Industry Subcommittee agrees, in which case Loan Periodshall mean the period as so extended pursuant to the terms set forth herein.

Loan Recipient.The term Loan Recipient shall mean StemCells, Inc. or any permitted assignee hereunder or

transferee pursuant to applicable CIRM Regulations, including but not limited to Article V, Section D of the LoanAdministration Policy

Material Adverse Effect.The term Material Adverse Effect shall mean any event, condition or change which

materially and adversely affects or could reasonably be expected to materially and adversely affect the Business or thefinancial results of operations of the Loan Recipient, or its financial condition.

No Go Milestones.The term No Go Milestones shall mean the milestones specified in the Notice of Loan Award

the occurrence of which, as determined by CIRM in its reasonable but sole discretion, permits either party to terminate theCIRM-Funded Project and, in accordance with the provisions in this Loan Agreement, the Parties obligations to continueto fund the CIRM-Funded Project.

Notice of Loan Award or NLA.The terms Notice of Loan Award or NLA shall mean the Notice of LoanAward executed by CIRM and Loan Recipient in connection with the Application.

Organizational Documents.The term Organizational Documents shall mean Loan Recipients certificate of

incorporation and bylaws (or comparable organizational documents), each as amended to date, which have been furnishedto CIRM by Loan Recipient.

PBGC. The term PBGC shall mean the Pension Benefit Guaranty Corporation or any Person succeeding to any or

all of its functions under ERISA.

Permitted Indebtedness.The term Permitted Indebtedness shall mean:

(a) Loan Recipients Indebtedness to CIRM;

(b) Indebtedness existing on the Effective Date and described in Schedule 7.8;

(c) Indebtedness secured by a lien described in Section 7.8(d) of this Agreement;





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(d) Indebtedness to trade creditors incurred in the ordinary course of business;

(e) Indebtedness arising from credit facilities, term loans and other debt financings (including, for the avoidance

of doubt, any debt financing provided by Loan Recipients equity investors), established to support the Loan Recipientsworking capital and general corporate needs; provided that such Indebtedness [****], unless Loan Recipient obtains theprior approval of the President of CIRM; and

(f) Indebtedness that is subordinated to the Loan Recipients Indebtedness to CIRM, pursuant to subordination,intercreditor or similar agreements reasonably satisfactory to CIRM.

Permitted Lien(s).The term Permitted Lien or Permitted Liens shall have the meaning provided in Section 7.8of this Agreement.

Person. The term Person shall mean an individual, partnership, corporation, limited liability company, association,trust, unincorporated organization or any other entity or organization, including a government or agency or politicalsubdivision thereof.

Plan. The term Plan shall mean any employee pension benefit plan covered by Title IV of ERISA or subject to theminimum funding standards under Section 412 of the Code that either (a) is maintained by a member of the ControlledGroup for employees of a member of the Controlled Group or (b) is maintained pursuant to the collective bargaining

agreement or any other arrangement under which more than one employer makes contributions and to which a member ofthe Controlled Group is then making or accruing an obligation to make contributions or has within the preceding five planyears made contributions.

Product. The term Product shall mean the use of HuCNS-SC cells (purified human neural stem cells) to treatAlzheimers disease.

Product-Backed Loan. The term Product-Backed Loan shall have the meaning given in the Loan Administration

Policy.

Product Revenue.The term Product Revenue shall mean Net Commercial Revenue received by the LoanRecipient or by any joint venture or subsidiary created by Loan Recipient, and any upfront licensing fees, development

milestone payments received from a product development partner, and royalties on commercial sales, which arise from orare related to development and/or commercial sale of the Product.

Progress Milestones. The term Progress Milestones shall mean those milestones specified in the Notice of Loan

Award by which CIRM will measure Loan Recipients progress in achieving the aims of the CIRM-Funded Project.

Project Costs.The term Project Costs shall mean those CIRM-funded costs identified in the budget included in theNotice of Loan Award, and any other CIRM-funded costs that may be specifically identified with the CIRM-Funded

Project and mutually agreed upon by CIRM and Loan Recipient.

[****] Certain information has been omitted and filed separately with the Commission. Confidential treatment has beenrequested with respect to the omitted portions.

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Project Period.The term Project Period shall mean the total amount of time, starting on the Project Start Date, thatCIRM funds the CIRM-Funded Project and authorizes the principal investigator to conduct the work in the approved

application.

Project Start Date. The term Project Start Date shall mean such date [****] that the parties agree to initiate workunder the CIRM-Funded Project, which date will be the first of a month and no earlier than the date of the first

Disbursement.

Property. The term Property shall mean, as to any Person, all types of real, personal, tangible, intangible or mixedproperty owned by such Person whether or not included in the most recent balance sheet of such Person and itssubsidiaries under GAAP.

Risk Premium Payment.The term Risk Premium Payment shall mean the payment or payments that LoanRecipient is required to make to CIRM, in lieu of providing warrants, pursuant to Section E of Article VII of the LoanAdministration Policy and as provided under Section 4.5.

Request for Applications 10-05 or RFA 10-05. The terms Request for Applications 10-05 and RFA 10-05 shallmean the request for applications issued by CIRM in 2010 for Disease Team Therapy Development Awards, and includethe Supplement to RFA 10-05 issued in September 2011.

Subsidiary. The term Subsidiary shall mean any corporation or other Person more than fifty percent (50%) of theoutstanding ordinary voting shares or other equity interest of which is at the time directly or indirectly owned by LoanRecipient, by one or more of its Subsidiaries, or by Loan Recipient and one or more of its Subsidiaries.

Third Party. The term Third Party shall mean an entity other than CIRM and its Affiliates and Loan Recipient andits Affiliates.

1.2 Other Terms.The definitions set forth in the CIRM Loan Administration Policy (Cal. Code Regs., tit. 17,

100800 et seq.), the CIRM Scientific and Medical Accountability Standards (Cal. Code Regs., tit. 17, 100010 et seq.),the CIRM Intellectual Property and Revenue Sharing Requirements for Non-Profit and For-Profit Grantees (Cal. CodeRegs., tit. 17, 100600 et seq.), and the CIRM Grants Administration Policy for Academic and Non-Profit Institutions

(Cal. Code Regs., tit. 17, 100500 et seq.) shall apply to the terms used in this Agreement unless otherwise specified.

ARTICLE IIINCORPORATION BY REFERENCE

2.1 Notice of Loan Award.The Notice of Loan Award is hereby incorporated into this Agreement by reference. Inthe event of a conflict between provisions in this Loan Agreement and the Notice of Loan Award, the Loan Agreementshall prevail.






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2.2 Application for CIRM Disease Team Development Award.Loan Recipients Application for a Disease TeamTherapy Development Research Award, including all attachments and supplemental information, submitted to CIRM or

its agents in response to RFA 10-05 is hereby incorporated into this Agreement by reference.

ARTICLE IIIAPPLICATION OF CIRM REGULATIONS

Loan Recipient shall be bound by, and shall comply with, all CIRM regulations applicable to loans to for-profitorganizations, including the CIRM Loan Administration Policy (Cal. Code Regs., tit. 17, 100800 et seq.), the CIRMScientific and Medical Accountability Standards (Cal. Code Regs., tit. 17, 100010 et seq.), the CIRM IntellectualProperty Provisions Applicable to Loan Recipients (Cal. Code Regs., tit. 17, 100801; and the CIRM Grants

Administration Policy for Academic and Non-Profit Institutions (Cal. Code Regs., tit. 17, 100500 et seq.), as madeapplicable to loan recipients pursuant to the Loan Administration Policy, in each case as existing as of the Effective Date.The Loan Administration Policy in effect on the Effective Date of this Agreement shall apply to Loan Recipient, the Loan

and this Agreement, unless Loan Recipient and CIRM mutually agree that an amendment to the Loan AdministrationPolicy shall apply to Loan Recipient, the Loan and this Agreement.

ARTICLE IV

LOAN AND TERMS OF PAYMENT

4.1 Maximum Loan Amount; Repayment.Subject to and upon the terms and conditions of this Agreement and inreliance on the representations and warranties set forth in this Agreement, CIRM agrees, subject to the terms and

conditions hereof, to provide Loan Recipient a Loan in an aggregate principal amount equal to the Loan Award. LoanRecipient agrees to repay the Loan Balance at the end of the Loan Period (or if such day is not a business day, then,without any further penalty or fee, the first business day after such date), unless (a) Loan Recipient elects to extend the

Loan Period pursuant to Section 4.8, in which case such repayment will occur at the end of the Loan Period as so extended(or if such day is not a business day, then, without any further penalty or fee, the first business day after such date) subjectto the Loan Recipient making payments during such extended Loan Period as provided under Article VII, Section J of the

Loan Administration Policy, (b) Loan Recipients obligation to repay the Loan Balance is accelerated pursuant to Sections4.9 or 8.4, in which case such repayment will occur upon the effective date of such acceleration, (c) the Loan Recipienttransfers the Loan to a new Loan Recipient pursuant to Article V, Section D.5 of the Loan Administration Policy and

CIRMs President consents to such transfer as provided in Article V, Section D.5 of the Loan Administration Policy, or(d) all or part of the Loan is forgiven pursuant to Article VII, Section I of the Loan Administration Policy and not

reinstated pursuant to Article VII, Section I of the Loan Administration Policy, Section 4.10 of this Agreement, or CIRMhas terminated the loan pursuant to Section 8.1(f) and no Event of Default then exists, in which case Loan Recipient shallhave no obligation to repay the Loan Balance.

4.2 Use of Proceeds.The Loan Recipient shall use the proceeds of the Loan solely for the purposes of funding the

CIRM-Funded Project as specified in the Budget. The parties





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understand and agree that any budgets delivered hereunder are good faith estimates made by Loan Recipient based uponinformation then available to it. Any changes to the Budget shall be subject to Section D.4 of Article V of the CIRM

Grants Administration Policy for Academic and Non-Profit Institutions.

4.3 Interest.The base interest rate for each Disbursement of the Loan shall be a per annum rate equal to the LondonInter-Bank Offered Rate (LIBOR) for a one-year deposit in U.S. dollars, as published by the Wall Street Journal (or if

the Wall Street Journal is not available, a comparable source) on the date of the applicable Disbursement to Loan

Recipient, plus two percent (2%) (the Base Rate). The interest rate so determined shall apply only to the DisbursedLoan Amount being disbursed on such Disbursement date, and not for the Disbursed Loan Amount outstanding beforesuch Disbursement date or for any subsequent Disbursement. Interest shall be compounded annually on the principal

amount disbursed by CIRM from the date of the applicable Disbursement to Loan Recipient. For years six through ten ofthe Loan Period, the interest rate for each Disbursement shall increase from its Base Rate by an additional one percent(1%) on each of the fifth, sixth, seventh, eighth, and ninth anniversaries of the Project Start Date. If for any reason on a

date a Disbursement is required to be made LIBOR is not being published or is not available, any Disbursement requiredto be made on such date shall bear interest at the previously established LIBOR rate until LIBOR is available or published(on which date such Disbursement shall begin bearing interest as provided in this Section 4.3). Any amount not paid when

due hereunder shall thereafter bear interest at the then-applicable per annum interest rate specified hereunder, plus fivepercent (5%).

4.4 Disbursement Procedures and Limitations.

(a) Subject to and upon the terms and conditions of this Agreement, CIRM agrees, unless otherwise notified inwriting by Loan Recipient, to disburse the proceeds of the Loan (each a Disbursement) at six-month intervalsaccording to the payment schedule set forth in the NLA, unless such schedule is modified by agreement of the parties or

otherwise as set forth herein. The aggregate of all Disbursements made pursuant to this Agreement shall not exceed theLoan Award. Each Disbursement shall cover CIRMs portion of the costs of the CIRM-Funded Project for the next sixmonths (with the first six-month period commencing as of the Project Start Date and each subsequent Disbursement

covering the next succeeding six-month period); and, in addition, the first Disbursement shall cover Loan Recipientscosts and expenses for the CIRM-Funded Project during the 90-day period immediately before the Project Start Date.

(b) CIRM may temporarily suspend or permanently cease Disbursements pursuant to the Loan Administration

Policy, including without limitation, Article V, Section J, provided, however, that CIRM shall give Loan Recipient writtennotice of its intent to suspend or permanently cease Disbursements and the reason therefore (a Default) and LoanRecipient shall have [****] days in which to cure such Default.

(c) CIRM may temporarily suspend or permanently cease Disbursements if CIRM determines, in its reasonable,but sole discretion, that a No Go Milestone has occurred, provided, however, that CIRM shall give Loan Recipient writtennotice of its intent to suspend or permanently cease Disbursements and the reason therefore and Loan Recipient shall have

[****] days in which to correct such No Go Milestone.


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(d) CIRM may temporarily suspend or permanently cease Disbursement if CIRM determines, in its reasonablebut sole discretion, that for any Disbursement Loan Recipient has not met the Financial Milestone for such Disbursement

Date; provided, however, if Loan Recipient fails to meet a Financial Milestone for a certain Disbursement Date, then LoanRecipient shall have 60 days to cure said failure and demonstrate that Loan Recipient now satisfies said FinancialMilestone. At least 30 days prior to any Disbursement Date on which a Financial Milestone needs to be satisfied, Loan

Recipient shall submit a report to CIRM, in such detail as CIRM shall require, showing whether or not Loan Recipientwill satisfy the Financial Milestone on such Disbursement Date.

(e) Failure to meet Progress Milestones is governed by paragraph E of the Terms and Conditions of the Awardsection of the Notice of Loan Award.

4.5 Risk Premium.

(a) In lieu of providing CIRM with warrants, Loan Recipient shall pay CIRM a one-time Risk PremiumPayment as contemplated by Section E.2.c of Article VII of the Loan Administration Policy, payable only upon the

achievement of each of the following commercial milestones, and in accordance with the following schedule:

Upon receipt of $50 million of Product Revenue in a fiscal year, Loan Recipient shall pay to CIRM an amountequal to one hundred percent (100%) of the Disbursed Loan Amount.

Upon receipt of $300 million of Product Revenue cumulatively, Loan Recipient shall pay to CIRM an amountequal to two hundred percent (200%) of the Disbursed Loan Amount.

Upon receipt of $600 million of Product Revenue cumulatively, Loan Recipient shall pay to CIRM an amountequal to two hundred percent (200%) of the Disbursed Loan Amount.

In no event shall Loan Recipient owe more than five times the Disbursed Loan Amount. In no event shall LoanRecipient owe warrants or any other equity to CIRM in connection with the Loan.

(b) The Loan Recipient shall have no obligation to pay any Risk Premium Payment which is due and payableafter (i) Loan Recipient transfers the Loan to a new Loan Recipient upon approval of CIRMs President and in accordancewith Article V, Section D of the Loan Administration Policy, (ii) Loan Recipient assigns this Agreement and any

Disbursement hereunder to a permitted assignee, (iii) the funding is discontinued or suspended by CIRM for any reasonother than for termination under Section 8.1(a)-(e), (iv) all or part of the Loan is


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forgiven pursuant to Section 4.10 of this Agreement and not otherwise reinstated pursuant to Section I of Article VII of theLoan Administration Policy, or (v) CIRM has terminated the loan pursuant to Section 8.1(f) and no Event of Default then

exists, in which case Loan Recipient shall have no obligation to pay any Risk Premium Payment; provided, however, thatthe obligation to pay a Risk Premium Payment will automatically be reinstated pursuant to Article VII, Section I of theLoan Administration Policy, in the event that Loan Recipient obtains revenues arising in whole or in part from the CIRM-

Funded Project that meet the specified Product Revenue thresholds set forth in the Section E.2.c of Article VII of the LoanAdministration Policy.

(c) The Loan Recipient shall pay any Risk Premium Payments owed pursuant hereto in accordance with theprovisions of Section E.2.e of Article VII of the Loan Administration Policy.

4.6 Indirect Costs and Facilities Costs.

(a) The Loan shall cover Indirect Costs incurred by Loan Recipient equal to twenty percent (20%) of allowableDirect Research Funding Costs awarded by CIRM. The Loan shall also cover Facilities Costs incurred by Loan Recipient

equal to thirty-five percent (35%) of allowable Project Costs.

(b) CIRM shall deduct [****] from the Indirect Costs portion of the initial Disbursement for the costs incurredby CIRM in engaging a financial consultant to conduct due diligence of Loan Recipient prior to the award of the Loan and

to conduct financial due diligence during the Loan Period. In addition, CIRM shall deduct [****] from the Indirect Costsportion of the first Disbursement made in each of the second, third, and fourth years of the Loan Period for the costs

incurred by CIRM in engaging a financial consultant to conduct financial due diligence of Loan Recipient during the LoanPeriod.

(c) If Loan Recipient requests to extend the term of the Loan Period pursuant to Section 4.8 and Section F ofArticle VII of the Loan Administration Policy and the Intellectual Property and Industry Subcommittee agrees, Loan

Recipient shall pay CIRM, in addition to interest and principal owed, [****] per year, payable on or before March 15 ofeach year, for each year the Loan is extended to reimburse CIRM for the costs that it incurs in engaging a financialconsultant to conduct financial due diligence of Loan Recipient during the extension.

4.7 Repayment at End of Loan Period/Prepayment.

(a) Unless (i) the Loan Period has been extended pursuant to Section 4.8, (ii) the repayment of the Loan Balancehas been accelerated pursuant to Sections 4.9 or 8.4, (iii) the Loan has been transferred by Loan Recipient pursuant to

Article V, Section D of the Loan Administration Policy and CIRMs President consents to such transfer as provided in

Article V, Section D of the Loan Administration Policy, (iv) all or part of the Loan is forgiven pursuant to Section 4.10 ofthis Agreement and the Loan has not been reinstated pursuant to Article VII, Section I of the Loan Administration Policy,

or (v) CIRM has terminated the loan pursuant to Section 8.1(f) and no Event of Default then exists, the Loan Balance, andall unpaid fees and other amounts due hereunder, is due and payable in full to CIRM on the last day of the Loan

[****] Certain information has been omitted and filed separately with the Commission. Confidential treatment has been

requested with respect to the omitted portions.


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Period (unless such day is not a business day, then, without any additional fees or penalties but with additional interest, onthe next business day). Loan Recipient may elect to prepay the full amount of the balance of Loan Balance, or to make one

or more partial prepayments, each in an amount of not less than $100,000, and in each case with accrued and unpaidinterest on the amount prepaid, at any time, without penalty or premium. Any amounts prepaid hereunder may not be re-borrowed by Loan Recipient.

(b) Beginning on the fifth anniversary of the Project Start Date, Loan Recipient shall repay interest pursuant to

Article VII, Section J of the Loan Administration Policy.4.8 Loan Extension. The Loan Recipient may request to extend the term of the Loan Period, provided that the Loan

Recipient provides notice to CIRM at least ninety (90) days prior to the end of the current Loan Period of Loan

Recipients intent to request to extend the Loan Period. Any extension pursuant to this section shall be subject to theapproval of the Intellectual Property and Industry Subcommittee based upon the recommendation of the President ofCIRM.

4.9 Loan Acceleration.CIRM shall have the right but not the obligation to require the Loan Recipient to acceleraterepayment of the Loan Balance if: (i) a Change of Control occurs, (ii) if this Agreement is terminated pursuant toSection 8.2(d), (e), (f), or (h), or because Loan Recipient has committed a material breach of the Loan Administration

Policy or (iii) the Loan Recipient is found guilty of criminal, scientific or financial misconduct pursuant to a judicialproceeding, or in the case of scientific misconduct, an investigation conducted by an independent body satisfactory toCIRM. In the event of a Change of Control, a decision to accelerate repayment of the Loan Balance shall be made by the

Intellectual Property and Industry Subcommittee of CIRMs Governing Board, based on the recommendation of thePresident of CIRM. If the proposed Change of Control is not a matter of public knowledge, the Intellectual Property andIndustry Subcommittee of CIRMs Governing Board shall consider the matter in closed session to protect the

confidentiality of the Change of Control transaction. Notwithstanding the above, in the event of any Change of Control,repayment of the Loan Balance shall not be accelerated if the conditions specified in Section H.1 of Article VII of theLoan Administration Policy are satisfied.

4.10 Loan Forgiveness.

(a) Forgiveness of the Loan Balance shall be governed by Article VII, Section I of the Loan AdministrationPolicy, including the reinstatement of the obligation to repay the Loan Balance in the event that the Loan Recipient

obtains revenues arising in whole or in part from the CIRM-Funded Project, provided that forgiveness shall be availableduring the Project Period only if Loan Recipient abandons the CIRM-Funded Project for failure to meet, or the occurrenceof, one or more No Go Milestones and CIRM is not entitled to accelerate the Loan pursuant to sections 4.9 (i)

(iii) above. After expiration of the Project Period, Loan Recipient shall have the right to abandon the Business forwhatever reason it deems appropriate and in that event, the Loan Balance shall be forgiven pursuant to Article VII,Section I of the Loan Administration Policy.

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(b) The Loan, even if it has been forgiven, will automatically be reinstated in the event that Loan Recipientsubsequently obtains Net Commercial Revenue arising in whole or in part from the CIRM-Funded Project. If the Loan

Recipients obligation to repay has been forgiven pursuant to Section 4.10(a) but further activity results in a repaymentobligation under this Section 4.10(b), the Loan Recipient must promptly notify CIRM. In such event, Loan Recipientsrepayment obligations hereunder will automatically be reinstated, except as otherwise agreed by Loan Recipient and the

Intellectual Property and Industry Subcommittee. In no event will the interest rate be higher than the per annum rate equalto LIBOR for a one-year deposit in U.S. dollars, as published by the Wall Street Journal (or if the Wall Street Journal is

not available, a comparable source) on the date of reinstatement plus 2%. The Loan Balance owed shall be reduced by anyamount previously repaid to CIRM prior to forgiveness. Upon reinstatement of the Loan, the Loan Recipient shall be

eligible for subsequent forgiveness and reinstatement in accordance with the terms hereof.

4.11 Effective Date.This Agreement shall take effect on the Effective Date. This Agreement shall continue in fullforce and effect for so long as a Loan Balance remains outstanding or CIRM has any obligation to make Disbursements

under this Agreement, unless it is earlier terminated pursuant to Section 8.1, the repayment obligation has been acceleratedpursuant to Sections 4.9 or 8.4, the Loan Balance has been forgiven pursuant to Section 4.10, or the Loan Recipient hastransferred the Agreement pursuant to Article V, Section D of the Loan Administration Policy.

4.12 Initial Disbursement.Concurrently with the initial Disbursement:

(a) CIRM shall have received this Agreement duly executed by Loan Recipient and the Budget;

(b) CIRM shall have received copies of Loan Recipients certificate of incorporation and bylaws, or articles oforganization or certificate of formation, as applicable, and operating agreement (or comparable organizational documents)and any amendments thereto, certified in each instance by its Secretary or Assistant Secretary;

(c) CIRM shall have received copies of resolutions of Loan Recipients Board of Directors (or similar governing

body) and (if applicable) stockholders authorizing the execution, delivery and performance of this Agreement and theother Loan Documents, and the consummation of the transactions contemplated hereby and thereby, all certified in eachinstance by its Secretary or Assistant Secretary;

(d) CIRM shall have received copies of the certificates of good standing for Loan Recipient (dated no earlierthan 30 days prior to the date hereof) from the office of the Secretary of State of its incorporation or organization and ofeach state in which it is qualified to do business as a foreign corporation or organization;

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(e) CIRM shall have received a list of the Loan Recipients Authorized Representatives;

(f) CIRM shall have received certification of the insurance required under Section 7.3 of this Agreement;

(g) CIRM shall have received UCC, tax and judgment lien search results against the Property of Loan Recipientevidencing the absence of Liens on its Property except as permitted by Section 7.8 hereof;

(h) CIRM shall have received the favorable written opinion of Loan Recipients in-house or outside counsel, in

the form attached hereto as Exhibit C, regarding the existence and power of Loan Recipient, the due authorization of theLoan Agreement (including the transactions contemplated thereby) and the enforceability of the Loan; and

(i) Loan Recipient shall certify that no Material Adverse Effect has occurred since the date that Loan Recipientsubmitted its application to CIRM.

(j) Loan Recipient shall have demonstrated to CIRMs reasonable but sole satisfaction that it has satisfied theFinancial Milestone.

4.13 All Disbursements.At the time of each subsequent Disbursement hereunder:

(a) the representations and warranties set forth in Sections 5.1, 5.2, 5.4, 5.5, 5.7, 5.8, 5.9, 5.10, 5.11 5.12, 5.13,5.14, and 5.15 shall be true and correct as of the date of such Disbursement, unless (i) the same expressly relate to anearlier date; or (ii) changes thereto are disclosed to CIRM in updates to the Schedules hereto provided by Loan Recipient

at least three (3) business days prior to such Disbursement; provided that, (A) in the case of (i) and (ii), no MaterialAdverse Effect exists, and (B) clauses (i) and (ii) shall not apply to the first two sentences of Section 5.1 and the first twosentences of Section 5.2; and

(b) no Event of Default or other event permitting termination of this Agreement shall have occurred and becontinuing or would occur as a result of such Disbursement.

Acceptance by Loan Recipient of a Disbursement hereunder through deposit of such Disbursement to Loan

Recipients account shall be deemed to be a representation and warranty by Loan Recipient on the date of suchDisbursement as to the matters specified in subsections (a) through (b), inclusive, of this Section 4.13; provided, however,that CIRM may continue to make Disbursements in its sole discretion, notwithstanding the failure of Loan Recipient to

satisfy one or more of the conditions set forth above and any such Disbursements so made shall not be deemed a waiver ofany Event of Default or other condition set forth above that may then exist.


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ARTICLE VLOAN RECIPIENT REPRESENTATIONS AND WARRANTIES

Except as set forth in the Schedules hereto delivered by Loan Recipient and with respect to Disbursements made afterthe date hereof, as such schedules are updated by Loan Recipient during the term of this Agreement, Loan Recipientrepresents and warrants to CIRM as follows:

5.1 Due Organization and Qualification.Loan Recipient is duly organized, validly existing and in good standingunder the laws of the state of its incorporation and is qualified to do business in each jurisdiction in which suchqualification is required, except where the failure to be so qualified would not have either individually or in the aggregate,a Material Adverse Effect on the Loan Recipient or the rights of CIRM under this Agreement, whether individually or

taken as a whole. Loan Recipient has all required power and authority to own its property, to carry on its business aspresently conducted or contemplated, to enter into this Agreement, and generally to carry out the transactionscontemplated hereby. The copies of Loan Recipients Organizational Documents provided to CIRM are correct and

complete as of the date hereof. Loan Recipient is not in violation of any term of its Organizational Documents, asamended, or in violation of any term of any agreement, instrument, judgment, decree, order, statute, rule or governmentregulation applicable to Loan Recipient or to which Loan Recipient is a party, in any case where any violation,

noncompliance or default would result in a Material Adverse Effect.

5.2 Due Authorization; No Conflict.Loan Recipient is duly authorized to enter into this Agreement and the otherLoan Documents, and the execution, delivery and performance thereof are valid and binding obligations of Loan Recipient

enforceable in accordance with their terms, except as may be limited by bankruptcy, insolvency, reorganization or otherlaws affecting the enforcement of creditors rights generally. The execution, delivery, and performance of the LoanDocuments are within Loan Recipients powers, have been duly authorized, and are not in conflict with nor constitute a

breach of any provision contained in Loan Recipients Organizational Documents, as amended, nor will they constitute anevent of default under any material agreement by which Loan Recipient is bound. The Loan Documents will not conflictwith any other material agreement or contract to which Loan Recipient is a party and will not violate any law, regulation

or order by which Loan Recipient is bound, nor is Loan Recipient in default under any material agreement by which it isbound, other than where any violation, noncompliance or default would not result in a Material Adverse Effect.

5.3 Name; Location of Chief Executive Office.Except as disclosed in Schedule 5.3, Loan Recipient has not done

business under any name other than that specified on the signature page hereof, and its exact legal name is as set forth inthe first paragraph of this Agreement. The chief executive office of Loan Recipient is located at the address indicated onthe signature page hereof.

5.4 Compliance with Laws.Loan Recipient is, and to Loan Recipients knowledge, all premises occupied and usedby Loan Recipient are, in compliance in all material respects with all federal, state, municipal and local laws, ordinancesand regulations, if any, that may in any way affect Loan Recipients Business, other than where a failure to comply would

not result in a Material Adverse Effect.


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5.5 Government Consents.Loan Recipient has obtained all consents, approvals and authorizations of, made alldeclarations or filings with, and given all notices to, all governmental authorities that are necessary for the continued

operation of Loan Recipients business as currently conducted, other than where failure to do so would not result in aMaterial Adverse Effect.

5.6 Full Disclosure.Neither the Loan Documents nor any document, certificate, projection, statement, representation

or warranty furnished to CIRM in writing by or on behalf of Loan Recipient, including but not limited to documents

submitted to CIRM and its agents by Loan Recipient in response to RFA 10-05, contains any untrue statement of amaterial fact, and none of the Loan Documents or such other documents, certificates, projections, statements,representations or warranties omit to state a material fact necessary in order to make the statements contained herein or

therein not misleading and except as disclosed in Loan Recipients public filings with the U.S. Securities and ExchangeCommission. CIRM recognizes that the estimates, projections and forecasts provided by Loan Recipient in good faith andbased upon reasonable assumptions are not to be viewed as facts, and that actual results during the period or periods

covered by any such estimates, projections and forecasts may materially differ from the projected or forecasted results.

5.7 Litigation.Except as set forth on Schedule 5.7, there is no action, suit or claim at law or in equity by any thirdparty, or before or by a governmental agency or instrumentality that is currently pending or, to the knowledge of Loan

Recipient, threatened against Loan Recipient or affecting any of its properties, assets or, to the knowledge of LoanRecipient, its employees which seeks to prevent the consummation of the transactions contemplated by the LoanDocuments or which if adversely decided against the Loan Recipient would have a Material Adverse Effect.

5.8 Bankruptcy.Loan Recipient: (i) does not intend to file a voluntary petition for relief pursuant to 11 U.S.C. 101et seq. Title 11 of the United States Code (the Bankruptcy Code); (ii) does not have any knowledge of anycircumstance that may result in the filing of a voluntary petition for relief pursuant to the Bankruptcy Code; and (iii) does

not have any notice of any creditors intention to file an involuntary petition for relief pursuant to the Bankruptcy Code.

5.9 Sufficient Assets.

In the good faith estimate of Loan Recipient, the aggregate value of all of the assets of Loan Recipient, at a fair

valuation, is equal to or greater than the total amount of Loan Recipients currently existing balance sheet liabilities(excluding the Loan, warrant liabilities, and Permitted Indebtedness). The fair valuation of Loan Recipients assets shallbe determined on the basis of that amount which may be realized within a reasonable time, in any manner through

realization of the value of, or dispositions of, such assets at fair market value (i.e., the amount which could be obtained forthe properties in question within such period by a capable and diligent business person from an interested buyer who iswilling to purchase under ordinary selling conditions). Loan Recipient is able to pay its debts as they become due in the

ordinary course of business for the next [****] months.


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5.10 Title to Properties.Except as set forth on Schedule 5.10, Loan Recipient has good and marketable title in feesimple to such of its fixed assets as are real property, and good and merchantable title to all of its other properties and

assets used in the conduct of the Business by Loan Recipient, free and clear of mortgages, security interests, pledges,charges, liens, restrictions or encumbrances except for Permitted Liens or as disclosed in writing to CIRM. To LoanRecipients knowledge, all machinery and equipment included in such properties described in the previous sentence is in

good condition and repair, ordinary wear and tear excepted, and all leases of real or personal property used in the conductof the Business by Loan Recipient to which Loan Recipient is a party are fully effective and afford Loan Recipient

peaceful and undisturbed possession of the subject matter of such leases.

5.11 Indebtedness.Loan Recipient has no outstanding Indebtedness, except for Permitted Indebtedness or as

previously disclosed to CIRM in writing.

5.12 Tax Matters.Loan Recipient has filed all foreign, federal, state, and local income, excise or franchise taxreturns, real estate, and personal property tax returns, sales and use tax returns, and other tax returns required to be filed by

it (and such returns are true and correct in all material respects) and has paid all taxes owed by it, except taxes which havenot yet accrued or otherwise become due or for which adequate provision has been made in the pertinent financialstatements. All taxes and other assessments and levies which Loan Recipient is required to withhold or collect have been

withheld and collected and have been paid over to the proper governmental authorities, except where the failure to paywould not have a Material Adverse Effect. With regard to the income tax returns of Loan Recipient, Loan Recipient hasnot received notice of any audit or of any purported deficiencies from any taxing authority, and no controversy with

respect to taxes of any type is pending or, to the knowledge of Loan Recipient, threatened, unless, after the date hereof,

such notice or controversy is disclosed to CIRM in writing.

5.13 Contracts and Commitments.Loan Recipient is not in default under any contract, obligation or commitment,

where such default would have a Material Adverse Effect. To the knowledge of Loan Recipient, there is no state of factswhich upon notice or lapse of time or both would constitute such a default, nor would the execution, issuance and deliveryof this Agreement, or the consummation of any transaction contemplated hereby, constitute such a default, where such

default would have a Material Adverse Effect.

5.14 Proprietary Rights; Employee Restrictions.

(a) All Intellectual Property Rights created or generated by any employee or officer of Loan Recipient in the

course of their performance of the CIRM-Funded Project for Loan Recipient have been assigned to Loan Recipient.Except as disclosed in Schedule 5.14, Loan Recipient has not received communications from any Third Party alleging thatthe currently contemplated activities or products related to the Business infringe on any Intellectual Property Rights of any

such third Person, nor have any of the Intellectual Property Rights necessary to the conduct of the Business been subject toU.S. Patent Office interference proceedings, a re-examination, or any other proceeding challenging Loan Recipientspatent rights related to the Business. Loan Recipient has taken commercially reasonable measures to

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protect and preserve the security, confidentiality (except and to the extent where disclosure is required by law or suchinformation is already in the public domain) and value of its Intellectual Property Rights, including its trade secrets and

other confidential information. For the purposes of this Agreement, Intellectual Property Rights shall mean any andall rights in patents, patent applications, copyrights, copyright applications, licenses, databases, computer programs andother computer software user interfaces, know-how, test data and results not disclosed to regulators, financial and cost

information and data, trade secrets, trademarks, trademark applications, service marks, service mark applications, tradenames, customer lists, proprietary technology, processes and formulae, source code, object code, algorithms, architecture,

structure, inventions, trade dress, logos and designs and all documentation and media constituting, describing or relating tothe foregoing.

(b) All employees of Loan Recipient have entered into non-disclosure and assignment of invention agreementsfor the benefit of Loan Recipient.

5.15 Regulatory Compliance.Loan Recipient is not an investment company or a company controlled by an

investment company under the Investment Company Act of 1940. Loan Recipient is not engaged as one of its activitiesin extending credit for margin stock (under Regulations G, T and U of the Federal Reserve Board of Governors). To LoanRecipients knowledge based on due inquiry, Loan Recipient is in compliance with the Federal Fair Labor Standards Act.

Loan Recipients properties or assets have not been used by Loan Recipient or, to Loan Recipients knowledge, byprevious Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than minimalamounts legally in the ordinary course of Loan Recipients business. Loan Recipient has delivered to CIRM, and at all

times will deliver to CIRM promptly after delivery or receipt, copies of all investigations relating to hazardous substances

at any facilities housing any element(s) of the CIRM-Funded Project, and any conclusions thereof.

5.16 Sophistication of Loan Recipient.Loan Recipient, by reason of its business and financial experience, has the

capacity to protect its own interests in connection with the transactions contemplated hereby and by the other LoanDocuments.

ARTICLE VI

CIRM REPRESENTATIONS, WARRANTIES AND COVENANTS

6.1 Due Authorization; No Conflict. CIRM hereby represents and warrants that it is duly authorized to enter intothis Agreement and that the execution, delivery and performance thereof will not conflict with any other agreement or

contract to which it is a party and will not, to the best of its knowledge, violate any law, regulation or order by which it isbound.

6.2 Enforceability.This Agreement has been duly executed and delivered by CIRM and constitutes a valid and

binding obligation of CIRM, enforceable against CIRM in accordance with its terms, subject only to the effect, if any, of(i) laws affecting the rights of creditors generally and (ii) rules of law governing specific performance, injunctive reliefand other equitable remedies.

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6.3 Sophistication of CIRM.CIRM, by reason of its business and financial experience, has the capacity to protect itsown interests in connection with the transactions contemplated hereby and by the other Loan Documents.

6.4 Subordination by CIRM.CIRM agrees from time to time to consider requests by Loan Recipient for CIRM tosubordinate the Indebtedness of Loan Recipient hereunder to other Permitted Indebtedness of Loan Recipient, but CIRMsagreement or refusal to any such subordination and any terms thereof shall be in its sole discretion.

ARTICLE VIICOVENANTS

7.1 Information and Access Covenants.During such time as any Loan Balance remains outstanding, except to theextent compliance in any case or cases is waived in writing pursuant to the terms of Section 10.3 hereof, Loan Recipient

shall:

(a) deliver to CIRM, as soon as practicable, but in any event by the end of February of each fiscal year (or within60 days of the end of the fiscal year, if the end of the Loan Recipients fiscal year is other than December 31 ), an updated

budget for the Business for such fiscal year;

(b) deliver to CIRM such other information relating to the financial condition, business or corporate affairsrelated to the Business of Loan Recipient as CIRM may from time to time reasonably request;

(c) at the reasonable request (including with respect to the number of such requests, the date, and the location) ofCIRM, provide CIRM Representatives reasonable access, at reasonable and mutually acceptable times during normalbusiness hours to all of the properties, books, contracts, documents, insurance policies, records and personnel (including

officers) of or with respect to the Business of Loan Recipient and shall furnish to CIRM Representatives such informationrelated to the Business as they may from time to time reasonably request; and

(d) deliver to CIRM reports detailing scientific progress and activities regarding the Business as specified in the

Notice of Loan Award.

7.2 Indemnification.Loan Recipient shall indemnify, defend and hold harmless CIRM, the State of California, andtheir respective agents, officers and employees (CIRM Indemnitees) against any and all liabilities, losses, damages,

claims, penalties, costs or expenses, interest, awards, judgments and penalties brought by or awarded to any Third Partywhich any of them may sustain, incur or be required to pay (howsoever they may occur), including, without limitation,reasonable attorneys and consultants fees (Losses), resulting from, arising out of, or in connection with: (i) Loan

Recipients execution, delivery and performance of Loan Recipients obligations under the Loan Documents; (ii) theoperation of Loan Recipients Business; (iii) any material breach by Loan Recipient of any representation or warranty orcovenant under the Loan Documents; (iv) any CIRM-Funded Invention, as defined in Cal. Code Regs., tit. 17, 100601(c);

or (v) the performance of the CIRM-Funded Project by Loan Recipient; provided that Loan Recipient shall not be requiredto indemnify the CIRM


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Indemnitees to the extent any such Losses are caused by (a) such CIRM Indemnitees gross negligence or willfulmisconduct, (b) a breach of CIRMs obligations under this Agreement or any other Loan Document or (c) a breach of any

of CIRMs representations and warranties made in this Agreement or any other Loan Document. Loan Recipientsindemnity obligations under this paragraph are in addition to Loan Recipients indemnity obligations under the LoanAdministration Policy. Loan Recipients agreement to indemnify, defend and hold the CIRM Indemnitees harmless as

provided above is conditioned on the CIRM Indemnitee (i) providing prompt written notice to Loan Recipient of anypotential or actual Losses within thirty (30) days after the CIRM Indemnitee has knowledge of such potential or actual

Losses, provided that failure to provide notice within thirty (30) days shall not excuse Loan Recipient obligation under thissection unless such delay actually prejudiced the defense of the claim; (ii) permitting the Loan Recipient to assume full

responsibility to investigate, prepare for and defend against any such Losses, provided that the selection of counsel isreasonably satisfactory to CIRM; (iii) assisting the Loan Recipient, at the Loan Recipients reasonable expense, in theinvestigation of, preparation for and defense against any claim, demand or action relating to such Losses; and (iv) not

compromising or settling any claim, demand or action in respect of such Losses without the Loan Recipients writtenconsent not to be unreasonably withheld, preconditioned or delayed.

7.3 Required Insurance.During the term of this Agreement, Loan Recipient shall procure and maintain at its

expense insurance customary for companies similarly situated with Loan Recipient and protecting Loan Recipient andCIRM (including naming CIRM as an additional insured and loss payee on such policies) against all claims, losses orexpenses resulting from alleged, adjudicated or statutory liability for injury to Persons or damage to property arising out of

or in connection with any CIRM-Funded Invention, as defined in Cal. Code Regs., tit. 17, 100601(c), and theperformance of the CIRM-Funded Project by Loan Recipient.

7.4 Maintenance of Business.Loan Recipient shall preserve and maintain its existence. [****]

7.5 Maintenance of Properties.Loan Recipient shall make commercially reasonable efforts to maintain, preserveand keep its property, plant and equipment in good repair, working order and condition (ordinary wear and tear excepted),and shall from time to time make all necessary and proper repairs, renewals, replacements, additions and betterments

thereto so that at all times the efficiency thereof shall be fully preserved and maintained, other than where failure to do sowould not result in a Material Adverse Effect.

7.6 Taxes and Assessments.Loan Recipient shall duly pay and discharge all taxes, rates, assessments, fees and

governmental charges upon or against it or its Property, in each case before the same become delinquent and beforepenalties accrue thereon, unless and to the extent that the same are being contested in good faith and by appropriateproceedings which prevent enforcement of the matter under contest and adequate reserves are provided therefor.



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7.7 No Guaranties.During such time as any Loan Balance remains outstanding, except to the extent compliance inany case or cases is waived in writing pursuant to Section 10.3 hereof, and other than any liabilities or guarantees in

connection with credit support provided in connection with (A) Permitted Indebtedness or (B) any investment permittedunder subsections (f), (g) and (h) of Section 7.9, Loan Recipient shall not become liable as endorser, guarantor, surety orotherwise for any debt, obligation or undertaking of any other Person exceeding [****] individually or in the aggregate, or

otherwise agree to provide funds for payment of the obligations of another, or supply funds thereto or invest therein orotherwise assure a creditor of another against loss, or apply for or become liable to the issuer of a letter of credit which

supports an obligation of another.

7.8 Liens.During such time as any Loan Balance remains outstanding, except to the extent compliance in any case or

cases is waived in writing pursuant to Section 10.3 hereof, Loan Recipient shall not create, incur or permit to exist anyLien of any kind on any Property owned by Loan Recipient;provided, however, that the foregoing shall not apply to noroperate to prevent the following Permitted Liens:

(a) Liens arising by statute in connection with workers compensation, unemployment insurance, old agebenefits, social security obligations, taxes, assessments, statutory obligations or other similar charges (other than Liensarising from ERISA), good faith cash deposits in connection with tenders, contracts or leases to which Loan Recipient is a

party or other cash deposits required to be made in the ordinary course of business, provided in each case that theobligation is not for borrowed money and that the obligation secured is not overdue or, if overdue, is being contested ingood faith by appropriate proceedings which prevent enforcement of the matter under contest and adequate reserves have

been established therefore;

(b) mechanics, workmens, materialmens, landlords, carriers or other similar Liens arising in the ordinarycourse of business with respect to obligations which are not due or which are being contested in good faith by appropriate

proceedings which prevent enforcement of the matter under contest;

(c) judgment Liens and judicial attachment Liens not constituting an Event of Default under Section 8.2(b)hereof and the pledge of assets for the purpose of securing an appeal, stay or discharge in the course of any legal

proceeding, provided that the aggregate amount of such judgment liens and attachments and liabilities of Loan Recipientsecured by a pledge of assets permitted under this subsection, including interest and penalties thereon, if any, shall not bein excess of [****] at any one time outstanding;

(d) Liens on equipment of Loan Recipient created solely for the purpose of securing indebtedness incurred tofinance the purchase price of such Property, provided that no such Lien shall extend to or cover other Property of LoanRecipient other than the respective Property so acquired, and the principal amount of indebtedness secured by any such

Lien shall at no time exceed the purchase price of such Property, as reduced by repayments of principal thereon;


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(e) Liens arising out of Indebtedness (other than the Loan itself) incurred by Loan Recipient solely to fund thecost and expenses of the CIRM-Funded Project;

(f) Liens disclosed in Schedule 7.8(f), including the amounts thereof;

(g) Liens for taxes, fees, assessments or other governmental charges or levies that either are not delinquent or arebeing contested in good faith by appropriate proceedings;

(h) Liens securing Permitted Indebtedness;

(i) Liens incurred in the extension, renewal or refinancing of the Indebtedness secured by Liens described insubsections (d), (e), (f) or (h); provided that any extension, renewal or replacement Lien must be limited to the propertyencumbered by the existing Lien and the principal amount of the Indebtedness may not increase;

(j) Leases, subleases, licenses, sublicenses, options, rights of first refusal, rights to negotiate and the like grantedto third parties in the ordinary course of Loan Recipients business, provided that the foregoing do not, individually or inthe aggregate, have a Material Adverse Effect; and

(k) Liens arising from the rights of a licensor or grantor under the terms and conditions of a license, option orother right granted to or by Loan Recipient, provided that any such Lien does not encumber the Business.

7.9 Investments, Acquisitions, Loans and Advances.During such time as any Loan Balance remains outstanding,

except to the extent compliance in any case or cases is waived in writing pursuant to Section 10.3 hereof, Loan Recipientshall not, directly or indirectly, make, retain or have outstanding any investments (whether through purchase of stock orobligations or otherwise) in, or loans or advances to (other than for travel advances and other similar cash advances made

to employees in the ordinary course of business), any other Person, or acquire all or any substantial part of the assets orbusiness of any other Person or division thereof;provided, however, that the foregoing shall not apply to nor operate toprevent:

(a) investments in direct obligations of the United States of America or of any agency or instrumentality thereofwhose obligations constitute full faith and credit obligations of the United States of America; investments in directobligations of the State of California whose obligations constitute full faith and credit obligations of the State of

California;

(b) investments in commercial paper rated at least P-1 by Moodys and at least A-1 by S&P;


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(c) investments in certificates of deposit issued by any United States commercial bank having capital and surplusof not less than $100,000,000;

(d) investments in repurchase obligations with a term of not more than 7 days for underlying securities of thetypes described in subsection (a) above entered into with any bank meeting the qualifications specified in (c) above,providedall such agreements require physical delivery of the securities securing such repurchase agreement, except those

delivered through the Federal Reserve Book Entry System;

(e) investments in money market funds that invest solely, and which are restricted by their respective charters toinvest solely, in investments of the type described in the immediately preceding subsections (a), (b), (c) and (d) above;

(f) investments existing on the date of this Agreement in its Subsidiaries and Affiliates;

(g) the purchase of securities or acquisition of assets in connection with strategic transactions involving LoanRecipient and other Persons, including without limitation (i) joint ventures, manufacturing, marketing or distributionarrangements or (ii) technology transfer or development arrangements; or

(h) any acquisition by Loan Recipient of the assets or securities of a Person or division thereof for the purpose ofacquiring intellectual property or other assets.

7.10 Dividends and Certain Other Restricted Payments.During such time as any Loan Balance remains

outstanding, except to the extent compliance in any case or cases is waived in writing pursuant to Section 10.3 hereof,

Loan Recipient will not (a) declare or pay any cash dividends or cash distributions, on any stock or other equity interestsof Loan Recipient or (b) directly or indirectly, through any Subsidiary or otherwise, purchase, redeem or retire any of its

stock or other equity interests or make any other payment or distribution, either directly or indirectly, through anySubsidiary or otherwise, in respect of its stock or other equity interests, other than (i) the repurchase of stock or otherequity interests in the ordinary course of business of employees which leave the employ of Loan Recipient, (ii) the

repurchase of stock or other equity interests pursuant to agreements which permit Loan Recipient to repurchase suchshares at cost (or the lesser of cost or fair market value) upon termination of an employees, officers, directors orconsultants services to the Company or (iii) the repurchase by Loan Recipient from one or more former employees,

officers, directors or consultants of its equity securities during the Loan Period, provided that the aggregate repurchaseprice for all repurchases pursuant to this clause (iii) does not exceed [****] per year.

7.11 ERISA.Loan Recipient shall promptly pay and discharge all obligations and liabilities arising under ERISA of

a character which if unpaid or unperformed could reasonably be expected to result in the imposition of a Lien against any

of its Property. Loan Recipient shall promptly notify CIRM of: (a) the occurrence of any reportable event (as defined inERISA) with respect to a Plan, (b) receipt of any notice from the PBGC of its intention to seek termination of any Plan or

appointment of a trustee therefor, (c) its intention to terminate or withdraw from any Plan, and (d) the occurrence of anyevent with respect to any Plan which would result in the




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incurrence by Loan Recipient of any material liability, fine or penalty, or any material increase in the contingent liabilityof Loan Recipient with respect to any post-retirement Welfare Plan benefit. All terms used in this Section 7.11 and not

defined shall have the meaning given to them under ERISA.

7.12 Compliance with Laws.Loan Recipient shall comply in all respects with the requirements of all federal, stateand local laws, rules, regulations, ordinances and orders applicable to or pertaining to its Property or Business operations,

except where any such non-compliance, individually or in the aggregate, could not reasonably be expected to have a

Material Adverse Effect or result in a Lien upon any of its Property, other than a Permitted Lien.7.13 Diligent Conduct of Business.[****]

7.14 Use of Proceeds.The Loan Recipient shall use the credit extended under this Agreement solely for the purposes

set forth in, or otherwise permitted by, Section 4.2 hereof.

7.15 Diligence.The Loan Recipient shall use commercially reasonable efforts to perform the CIRM-Funded Projectwithin the time frame specified in the Notice of Loan Award.

7.16 Notification.If Loan Recipient becomes aware of any matters that could reasonably be expected to have aMaterial Adverse Effect pursuant to any review, examination, proceeding or correspondence, suits or actions related toLoan Recipients intellectual property necessary to the CIRM-Funded Project, Loan Recipient shall promptly notify CIRM

in writing.

ARTICLE VIIITERMINATION

8.1 Termination.

(a) Subject to the notice and cure provisions contained in Section 4.4 above, CIRM may terminate thisAgreement pursuant to Article V, Section J of the Grants Administration Policies, or Article V, Section J of the Loan

Administration Policy.

(b) CIRM may terminate this Agreement at any time after a material breach of any term of the Loan Documentsby Loan Recipient that is not cured within thirty (30) days of the date that CIRM provides notice of such breach to Loan

Recipient.

(c) CIRM may terminate this Agreement if any of the representations and warranties made herein by LoanRecipient were not true and correct in all material respects at the time they were made or deemed to be made under

Section 4.13 at the time of each Disbursement when they are reaffirmed.

(d) CIRM may terminate this Agreement if any of the Events of Default in Section 8.2 occur and are continuing.



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(e) Subject to the notice and cure provisions contained in Section 4.4 above, CIRM may terminate thisAgreement based on CIRMs determination, in its reasonable, but sole discretion, that Loan Recipient has failed to meet a

Financial Milestone.

(f) Subject to the notice and cure provisions contained in Section 4.4 above, CIRM may terminate thisAgreement based on CIRMs determination, in its reasonable, but sole discretion, that a No Go Milestone has occurred.

8.2 Events of Default and Remedies.Any one or more of the following shall constitute an Event of Defaulthereunder:

(a) Loan Recipient fails to pay within five (5) business days of the day when due all or any part of the principalof or interest on any Loan (whether at the stated maturity thereof or at any other time provided for in this Agreement), any

accrued interest or any fee or other obligation payable hereunder or under any other Loan Document;

(b) any judgment or judgments, writ or writs or warrant or warrants of attachment, or any similar process orprocesses, entered or filed against Loan Recipient or against any of its Property, in an aggregate amount in excess of

[****] (except to the extent fully covered by insurance pursuant to which the insurer has accepted liability therefor inwriting), and which remains undischarged, unvacated, unbonded or unstayed for a period of 45 days;

(c) Loan Recipient, or any member of its Controlled Group, fails to pay when due an amount or amounts

aggregating in excess of [****] which it shall have become liable to pay to the PBCG or to a Plan under Title IV ofERISA; or notice of intent to terminate a Plan or Plans having aggregate Unfunded Vested Liabilities in excess of [****](collectively, a Material Plan) is filed under Title IV of ERISA by Loan Recipient, or any other member of its

Controlled Group, any plan administrator or any combination of the foregoing, or the PBGC institutes proceedings underTitle IV of ERISA to terminate or to cause a trustee to be appointed to administer any Material Plan or a proceeding isinstituted by a fiduciary of any Material Plan against Loan Recipient, or any member of its Controlled Group, to enforce

Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within 45 days thereafter; or acondition exists by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Planmust be terminated;

(d) dissolution or termination of the existence of Loan Recipient, unless Loan Recipient has previouslytransferred the Loan to a new Loan Recipient pursuant to Article V, Section D of the Loan Administration Policy;

(e) Loan Recipient has had (i) entered involuntarily against it a final order for relief under the United States

Bankruptcy Code, as amended, (ii) does not pay, or admits in writing its inability to pay, its debts generally as they

become due, (iii) makes an assignment for the benefit of creditors, (iv) applies for, seeks, consents to or acquiesces in, theappointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any substantial part of its

Property, (v) institutes any proceeding seeking to have entered against it an order for relief


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under the United States Bankruptcy Code, as amended, to adjudicate it insolvent, or seeking dissolution, winding up,liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy,

insolvency or reorganization or relief of debtors or fails to file an answer or other pleading denying the materialallegations of any such proceeding filed against it, (vi) takes any corporate action in furtherance of any matter described inparts (i) through (v) above, or (vii) fails to contest in good faith any appointment or proceeding described in Section 8.2(f)

hereof; or

(f) a custodian, receiver, trustee, examiner, liquidator or similar official is appointed for Loan Recipient, or anysubstantial part of any of its Property, or a proceeding described in Section 8.2(e)(v) shall be instituted against any of LoanRecipient, and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a

period of 90 days.

(g) [****]

(h) [****]

8.3 Termination Requiring Repayment at End of Loan Period.When CIRM, at CIRMs election, has terminatedthis Agreement for any reason (other than pursuant to subsections (d), (e), (f) or (h) of Section 8.2 or subsection (f) ofSection 8.1 of this Agreement), (a) the remaining commitments of CIRM to make Disbursements of the Loan and all other

obligations of CIRM hereunder on the date stated in such notice (which may be the date thereof) shall terminate, and(b) the principal of and the accrued interest on all outstanding Loans shall be due and payable together with all other

amounts payable under the Loan Documents without further demand, presentment, protest or notice of any kind, at the endof the Loan Period. In the event that CIRM terminates the Loan pursuant to Section 8.1(f), the remaining commitments ofCIRM to make Disbursements of the Loan and all other obligations of CIRM hereunder on the date stated in such notice(which may be the date thereof) shall cease, and Loan Recipient shall have no obligation to repay the Loan Balance.

8.4 Termination Requiring Immediate Repayment.When any Event of Default described in subsections (d), (e),(f), or (h) of Section 8.2 of this Agreement has occurred and is continuing, or when Loan Recipient has materiallybreached the Loan Administration Policy, then this Agreement shall automatically, and without the necessity of any

further action, terminate and all outstanding Loans and interest thereon shall immediately become due and payabletogether with all other amounts payable under the Loan Documents, without presentment, demand, protest or notice of anykind, unless the repayment obligation is extended by CIRM, and the obligation of CIRM to make further Disbursements of

the Loan or extend further credit pursuant to any of the terms hereof shall immediately terminate.



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ARTICLE IXCOMPLIANCE WITH CERTAIN LAWS

9.1 Nondiscrimination.Loan Recipient shall not unlawfully discriminate against any qualified employee orapplicant for employment, or deny services to any individual because of race, color, national origin, ancestry, age, sex,religion, physical or mental handicap, or sexual orientation. Loan Recipient agrees to comply with all applicable Federal

and State statutes, rules and regulations prohibiting discrimination in employment.

9.2 Lobbying.Without limiting the provisions of Section 4.2 of this Agreement, no funds disbursed hereunder shallbe used for any activities to influence any matter pending before the California Legislature or the U.S. Congress,

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